So, what's with the yen?

I visited Japan for the first time in my life last May and came away overwhelmed.

It is, to me, without question the most civilised nation on earth, the almost genetic politeness of its people a lesson, and, hopefully, a direction to the future for all of us.

And within this bath of politeness is a culture that is at once cutting-edge modern (fashion, design) and unapologetically traditional (temples, Kabuki, sumo); wild and crazy (just go to Shinjuku or Shinbashi in Tokyo any evening of the week); and calm and peaceful (any of the hundreds of wonderful temples in Kyoto).

The people are unfailingly helpful; the systems work with neo-Germanic efficiency and beyond-German innovation -- just going to the toilet is a treat.

So, what's with the yen?

In fact, everything in Japan was so wonderful that nothing seemed 'expensive', including the costliest dinner for two I have ever had.

To me, it was all much more than value for money.

Nonetheless, while I was there, it became clear to me that the yen -- which was about 80 (to the dollar), already down about five per cent from its all-time high set in September 2011 -- would certainly weaken in the future.

Being there made it clear that Japan is an extremely rich country, which has never -- since the Second World War -- asserted itself on the global stage.

So, what's with the yen?

While there is no telling how much longer this decline will last, it would seem from the aggressive talk by the new prime minister and his partner in the finance ministry, it is likely to be longer rather than shorter.

Now, if the yen were to simply trace its average move, the downtrend would run till February 2014 and the yen would reach a range of 96 to 101.

If it repeated its longest trend (51 months), the yen could decline till December 2015 and reach all the way back to 120 to the dollar.

Of course, no moves are unidirectional, so there will certainly be pull-backs but the overall trend would remain downwards.

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Image: Narita Express E259 series train at the platform of Shinagawa Station in Tokyo, Japan.Photographs: Kiyoshi Ota/Getty Images

So, what's with the yen?

Perhaps, it's time to look at borrowing in yen -- Reliance and the Tatas already have -- and keeping at least part of the USD/JPY unhedged to capture some of this opportunity.

In the current market (88 to the dollar), the cost of hedging a five-year loan (two-year moratorium) using a combination of an 80/88 USD/JPY call spread, USD/INR principal-only swap and JPY Libor (London interbank offered rate) coupon-only swap would total 6.8 per cent plus the lending spread.

Thus, the overall cost would come in at sub-10 per cent -- in most cases -- with the opportunity to further improve the cost if the yen does, indeed, weaken.